THIRD DIVISION

[G.R. No. 161757. January 25, 2006.]

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.,

petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
Second Division; HON. ERNESTO S. DINOPOL, in his
capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch,
Quezon City and DIVINA A. MONTEHERMOZO, respondents.

Gaspar V. Tagalo for petitioner.

The Solicitor General for public respondents.
Neva B. Biancaver for private respondent.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS ARE

BINDING ONLY TO PARTIES OR THOSE PRIVY THERETO; CASE AT BAR. — The
finding of the Court of Appeals solely on the basis of the above-quoted
telefax message, that Sunace continually communicated with the foreign
"principal" (sic) and therefore was aware of and had consented to the
execution of the extension of the contract is misplaced. The message does
not provide evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract. That
Sunace and the Taiwanese broker communicated regarding Divina's
allegedly withheld savings does not necessarily mean that Sunace ratified
the extension of the contract. . . . There being no substantial proof that
Sunace knew of and consented to be bound under the 2-year employment
contract extension, it cannot be said to be privy thereto. As such, it and its
"owner" cannot be held solidarily liable for any of Divina's claims arising
from the 2-year employment extension as [Article 1311 of the] New Civil
Code provides.
2. ID.; SPECIAL CONTRACTS; AGENCY, IMPLIEDLY REVOKED WHEN
THE PRINCIPAL DIRECTLY MANAGES THE BUSINESS ENTRUSTED TO THE
AGENT AND DEALS DIRECTLY WITH THIRD PERSONS; CASE AT BAR. — As
Sunace correctly points out, there was an implied revocation of its agency
relationship with its foreign principal when, after the termination of the
original employment contract, the foreign principal directly negotiated with
Divina and entered into a new and separate employment contract in Taiwan.
Article 1924 of the New Civil Code reading "the agency is revoked if the
principal directly manages the business entrusted to the agent, dealing
directly with third persons," thus applies.

DECISION
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 CARPIO MORALES, J : p

Petitioner, Sunace International Management Services (Sunace), a

corporation duly organized and existing under the laws of the Philippines,
deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper
under a 12-month contract effective February 1, 1997. 1 The deployment
was with the assistance of a Taiwanese broker, Edmund Wang, President of
Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina
continued working for her Taiwanese employer, Hang Rui Xiong, for two
more years, after which she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a
complaint 2 before the National Labor Relations Commission (NLRC) against
Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign
principal alleging that she was jailed for three months and that she was
underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate
Regina T. Gavin issued Summons 3 to the Manager of Sunace, furnishing it
with a copy of Divina's complaint and directing it to appear for mandatory
conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have
been concluded, however.
On April 6, 2000, Divina filed her Position Paper 4 claiming that under
her original one-year contract and the 2-year extended contract which was
with the knowledge and consent of Sunace, the following amounts
representing income tax and savings were deducted:
Year Deduction for Deduction for Savings
Income Tax

1997 NT10,450.00 NT23,100.00

1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00; 5
and while the amounts deducted in 1997 were refunded to her, those
deducted in 1998 and 1999 were not. On even date, Sunace, by its
Proprietor/General Manager Maria Luisa Olarte, filed its Verified Answer and
Position Paper, 6 claiming as follows, quoted verbatim :
COMPLAINANT IS NOT ENTITLED
FOR THE REFUND OF HER 24 MONTHS
SAVINGS
3.Complainant could not anymore claim nor entitled for the
refund of her 24 months savings as she already took back her saving
already last year and the employer did not deduct any money from her
salary, in accordance with a Fascimile Message from the respondent
SUNACE's employer, Jet Crown International Co. Ltd., a xerographic
copy of which is herewith attached as ANNEX "2" hereof;

COMPLAINANT IS NOT ENTITLED

CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 TO REFUND OF HER 14 MONTHS TAX
AND PAYMENT OF ATTORNEY'S FEES
4.There is no basis for the grant of tax refund to the complainant
as the she finished her one year contract and hence, was not illegally
dismissed by her employer. She could only lay claim over the tax
refund or much more be awarded of damages such as attorney's fees
as said reliefs are available only when the dismissal of a migrant
worker is without just valid or lawful cause as defined by law or
contract.

The rationales behind the award of tax refund and payment of

attorney's fees is not to enrich the complainant but to compensate him
for actual injury suffered. Complainant did not suffer injury, hence,
does not deserve to be compensated for whatever kind of damages. ACTIHa

Hence, the complainant has NO cause of action against

respondent SUNACE for monetary claims, considering that she has
been totally paid of all the monetary benefits due her under her
Employment Contract to her full satisfaction.

6.Furthermore, the tax deducted from her salary is in compliance

with the Taiwanese law, which respondent SUNACE has no control and
complainant has to obey and this Honorable Office has no
authority/jurisdiction to intervene because the power to tax is a
sovereign power which the Taiwanese Government is supreme in its
own territory. The sovereign power of taxation of a state is recognized
under international law and among sovereign states.

7.That respondent SUNACE respectfully reserves the right to file

supplemental Verified Answer and/or Position Paper to substantiate its
prayer for the dismissal of the above case against the herein
respondent. AND BY WAY OF —

xxx xxx xxx (Emphasis and underscoring supplied)

Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ".
. . ANSWER TO COMPLAINANT'S POSITION PAPER" 7 alleging that Divina's 2-
year extension of her contract was without its knowledge and consent,
hence, it had no liability attaching to any claim arising therefrom, and Divina
in fact executed a Waiver/Quitclaim and Release of Responsibility and an
Affidavit of Desistance, copy of each document was annexed to said ". . .
ANSWER TO COMPLAINANT'S POSITION PAPER."
To Sunace's ". . . ANSWER TO COMPLAINANT'S POSITION PAPER,"
Divina filed a 2-page reply, 8 without, however, refuting Sunace's disclaimer
of knowledge of the extension of her contract and without saying anything
about the Release, Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunace's claim that the extension of
Divina's contract for two more years was without its knowledge and consent
in this wise:
We reject Sunace's submission that it should not be held
responsible for the amount withheld because her contract was
extended for 2 more years without its knowledge and consent because
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 as Annex "B" 9 shows, Sunace and Edmund Wang have not stopped
communicating with each other and yet the matter of the contract's
extension and Sunace's alleged non-consent thereto has not been
categorically established.

What Sunace should have done was to write to POEA about the
extension and its objection thereto, copy furnished the complainant
herself, her foreign employer, Hang Rui Xiong and the Taiwanese
broker, Edmund Wang.

And because it did not, it is presumed to have consented to the

extension and should be liable for anything that resulted thereform
(sic ). 10 (Underscoring supplied)

The Labor Arbiter rejected too Sunace's argument that it is not liable
on account of Divina's execution of a Waiver and Quitclaim and an Affidavit
of Desistance. Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any
part of the dispute, the same shall be reduced to writing and signed by
the parties and their respective counsel (sic ), if any, before the Labor
Arbiter.

The settlement shall be approved by the Labor Arbiter after

being satisfied that it was voluntarily entered into by the parties and
after having explained to them the terms and consequences thereof.

A compromise agreement entered into by the parties not in the

presence of the Labor Arbiter before whom the case is pending shall be
approved by him, if after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and
conditions of the settlement and that it was entered into freely
voluntarily (sic ) by them and the agreement is not contrary to law,
morals, and public policy.
And because no consideration is indicated in the documents, we
strike them down as contrary to law, morals, and public policy. 11

He accordingly decided in favor of Divina, by decision of October 9, 2000,12

the dispositive portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents
SUNACE INTERNATIONAL SERVICES and its owner ADELAIDA PERGE,
both in their personal capacities and as agent of Hang Rui
Xiong/Edmund Wang to jointly and severally pay complainant DIVINA A.
MONTEHERMOZO the sum of NT91,950.00 in its peso equivalent at the
date of payment, as refund for the amounts which she is hereby
adjudged entitled to as earlier discussed plus 10% thereof as
attorney's fees since compelled to litigate, complainant had to engage
the services of counsel.

SO ORDERED. 13 (Underscoring supplied)

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002, 14

affirmed the Labor Arbiter's decision.

CD Technologies Asia, Inc. © 2021 cdasiaonline.com

 Via petition for certiorari, 15 Sunace elevated the case to the Court of
Appeals which dismissed it outright by Resolution of November 12, 2002, 16
the full text of which reads:
The petition for certiorari faces outright dismissal.

The petition failed to allege facts constitutive of grave abuse of

discretion on the part of the public respondent amounting to lack of
jurisdiction when the NLRC affirmed the Labor Arbiter's finding that
petitioner Sunace International Management Services impliedly
consented to the extension of the contract of private respondent Divina
A. Montehermozo. It is undisputed that petitioner was continually
communicating with private respondent's foreign employer (sic ) . As
agent of the foreign principal, "petitioner cannot profess ignorance of
such extension as obviously, the act of the principal extending
complainant (sic ) employment contract necessarily bound it ."
Grave abuse of discretion is not present in the case at bar.

ACCORDINGLY, the petition is hereby DENIED DUE COURSE

and DISMISSED. 17
SO ORDERED.

(Emphasis on words in capital letters in the original; emphasis on

words in small letters and underscoring supplied)

Its Motion for Reconsideration having been denied by the appellate court by
Resolution of January 14, 2004, 18 Sunace filed the present petition for
review on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRC's finding that
Sunace knew of and impliedly consented to the extension of Divina's 2-year
contract. It went on to state that "It is undisputed that [Sunace] was
continually communicating with [Divina's] foreign employer." It thus
concluded that "[a]s agent of the foreign principal, 'petitioner cannot profess
ignorance of such extension as obviously, the act of the principal extending
complainant ( sic) employment contract necessarily bound it.'"
Contrary to the Court of Appeals finding, the alleged continuous
communication was with the Taiwanese broker Wang, not with the foreign
employer Xiong. DEICTS

The February 21, 2000 telefax message from the Taiwanese broker to
Sunace, the only basis of a finding of continuous communication, reads
verbatim:
xxx xxx xxx
Regarding to Divina, she did not say anything about her
saving in police station. As we contact with her employer, she
took back her saving already last years. And they did not deduct
any money from her salary. Or she will call back her employer to
check it again. If her employer said yes! we will get it back for
her.

Thank you and best regards.

CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 (sgd.)

Edmund Wang
President 19

The finding of the Court of Appeals solely on the basis of the above-
quoted telefax message, that Sunace continually communicated with the
foreign "principal" (sic) and therefore was aware of and had consented to the
execution of the extension of the contract is misplaced. The message does
not provide evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract. That
Sunace and the Taiwanese broker communicated regarding Divina's
allegedly withheld savings does not necessarily mean that Sunace ratified
the extension of the contract. As Sunace points out in its Reply 20 filed
before the Court of Appeals,
As can be seen from that letter communication, it was just an
information given to the petitioner that the private respondent had
t[aken] already her savings from her foreign employer and that no
deduction was made on her salary. It contains nothing about the
extension or the petitioner's consent thereto. 21

Parenthetically, since the telefax message is dated February 21, 2000,

it is safe to assume that it was sent to enlighten Sunace who had been
directed, by Summons issued on February 15, 2000, to appear on February
28, 2000 for a mandatory conference following Divina's filing of the
complaint on February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess
ignorance of such an extension as obviously, the act of its principal
extending [Divina's] employment contract necessarily bound it, 22

it too is a misapplication, a misapplication of the theory of imputed

knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent,
Sunace, to the principal, employer Xiong, not the other way around . 23
The knowledge of the principal-foreign employer cannot, therefore, be
imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to
be bound under the 2-year employment contract extension, it cannot be said
to be privy thereto. As such, it and its "owner" cannot be held solidarily
liable for any of Divina's claims arising from the 2-year employment
extension. As the New Civil Code provides,
Contracts take effect only between the parties, their assigns, and
heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by
provision of law. 24

Furthermore, as Sunace correctly points out, there was an implied

CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 revocation of its agency relationship with its foreign principal when, after the
termination of the original employment contract, the foreign principal
directly negotiated with Divina and entered into a new and separate
employment contract in Taiwan. Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons.

thus applies.
In light of the foregoing discussions, consideration of the validity of the
Waiver and Affidavit of Desistance which Divina executed in favor of Sunace
is rendered unnecessary.
WHEREFORE, the petition is GRANTED. The challenged resolutions of
the Court of Appeals are hereby REVERSED and SET ASIDE. The complaint of
respondent Divina A. Montehermozo against petitioner is DISMISSED.
SO ORDERED.
Quisumbing, Carpio and Tinga, JJ., concur.

Footnotes
1.NLRC records, p. 18.
2.Id. at 2.

3.Id. at 5.
4.Id. at 21-26.
5.Id. at 52.
6.Id. at 13-19.
7.Id. at 28-34.

8.Id. at 36-37.
9.Photocopy of a telefax message of Taiwanese broker Wang to Sunace, NLRC
records, p. 26.
10.NLRC records, pp. 55-56.
11.Id. at 56-57 (citations omitted).
12.Id. at 51-58.
13.Id. at 57-58.

14.Id. at 190-196.
15.CA rollo, pp. 2-113.
16.Penned by Associate Justice Ruben T. Reyes with Associate Justices Remedios
Salazar-Fernando and Edgardo F. Sundiam, concurring.
17.CA rollo, pp. 115-116 (citations omitted).
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 18.Id. at 154-157.
19.Supra note 9.

20.CA rollo, pp. 146-152.

21.Id. at 148.
22.Id. at 29, 116 and 157.
23.Rovels Enterprises, Inc. v. Ocampo , G.R. No. 136821, October 17, 2002, 391
SCRA 176; vide Air France v. Court of Appeals, et al., 211 Phil. 601 (1983).
24.CIVIL CODE, Article 1311.

CD Technologies Asia, Inc. © 2021 cdasiaonline.com